Is a federal survivor annuity taxable?

Two different starting points

The publication separates survivors of federal employees (Part IV) from survivors of retirees (Part V). If the employee died before retiring, the annuity starting date is the day after the date of death, and the survivor recovers the employee’s cost using the same methods as retirees. Annuities starting after November 18, 1996 must use the Simplified Method. For a retiree’s survivor, the tax-free monthly amount is the same as the retiree’s monthly exclusion from Worksheet A line 4 if the retiree used the Simplified Method, and it stays fixed even if the payment goes up or down.

Survivor of an employee: the Diane Green example

Diane Green, age 48, began receiving a $1,500 monthly CSRS annuity in March 2025 when her husband, a federal employee, died. She received 10 payments, so line 1 is $15,000. His contributions were $36,000. Table 1 gives 360 for her age, so the monthly exclusion is $36,000 ÷ 360 = $100, and $1,000 is excluded for the year. The publication’s worksheet shows her taxable annuity for the year as $14,000, and $35,000 of cost still to recover. If she dies before 360 payments are made, the unrecovered cost is an “Other Itemized Deduction” on her final return.

When children also receive annuities

A child’s survivor annuity counts as the child’s own income, not yours. When a spouse and children are paid, the monthly exclusion is split in proportion to each person’s share of the total monthly annuity. In the publication’s Green example, with a son receiving $500 a month, Diane’s share of the $100 exclusion is $100 × $1,500 ÷ $2,000 = $75, and Robert’s is $25. When his temporary annuity ends, the total exclusion does not change; it is reallocated to the remaining beneficiaries.

The calculator above does this split. In the retiree-side example, Kate and her two children share a $150 exclusion: Kate gets $150 × $840 ÷ $1,500 = $84, each child gets $33, and after one child’s annuity ends Kate’s share becomes about $108.

The FERS death benefit

The special FERS death benefit paid to the spouse of an active FERS employee who died after at least 18 months of service can be a single payment or a 3-year annuity. With a single payment and no FERS survivor annuity, at least part is tax free, an amount equal to the employee’s FERS contributions. If a FERS survivor annuity is also paid, all of the single payment is taxable. For the 3-year annuity with no survivor annuity, the tax-free part of each monthly payment is the contributions divided by 36.

Public safety officers and the exclusion limit

If you receive a survivor annuity as the spouse, former spouse or child of a public safety officer killed in the line of duty, the annuity is generally excludable to the extent due to the officer’s service as a public safety officer, with exceptions such as intentional misconduct or intoxication. The FERS death benefit does not qualify for this exclusion. For other survivors, the exclusion for annuities starting after 1986 ends when the cost is recovered, and payments after that are fully taxable.

Related lump sums

If no one is eligible for a survivor annuity, a lump sum of contributions plus interest goes to the estate or other beneficiary, who is taxed only on accrued interest, and the taxable amount is subject to 10% withholding. If a survivor annuity ends before the contributions are paid out, the remaining lump sum is rarely taxable. The publication’s Worksheet D example: a $38,400 lump sum, $1,000 previously excluded, $45,000 total cost, so the taxable amount is $0.

Sources

• IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits (2025): Rules for Survivors of Federal Employees (Part IV): FERS Death Benefit; CSRS or FERS Survivor Annuity (Diane Green example); Survivors of Slain Public Safety Officers; Lump-Sum CSRS or FERS Payment. Rules for Survivors of Federal Retirees (Part V); Filing Requirements (Part I). Read November 2, 2026.

Edition read: Publication 721 (2025), for use in preparing 2025 returns. Dollar limits and dates in this publication are for 2025; check the current publication and form instructions for your tax year. This page summarizes the publication and does not replace it.